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    Strategic Change, Execution Blunder (Part 2) – What Happened At Nokia

    By Claus Schafhalter | September 26, 2011

    Nokia N9

    Nokia of Finland was at the top 2007. Sure, their market cap was even higher in 2000 at the climax of the tech bubble, but only 4 years ago Nokia outperformed any competitor in the mobile phone business. Overall they lead the cell phone market and invented the smart phone. Their share price was around $40 per share, their market cap almost $150 Billion.

    From 2007 to 2009 Nokia’s share price went down to $10, market cap was about $40 Billion. Obviously there was a lot wrong with Nokia, most notably they miscalculated the impact of new entrants into the market, like Apple and Google. And they were way too slow to answer their new challengers with competitive products.

    Consequently the board decided to hire a new CEO, tasked to stop the meltdown of Nokia, its market share, its profits and its share price. In September 2010 Steven Elop, and ex-Microsoft executive took the reign in Espoo, Nokia’s headquarters near Helsinki. Elop started out streamlining Nokia’s strategy, promised to simplify development of the software running their phones by using a cross-platform tool (Qt), and repositioned Nokia’s existing offering apparently strengthening their strengths and addressing their weaknesses.

    The stock market rewarded the new way with a steady increase in share value from about $8 at the low to almost $12 at the recent high in February 2011.

    But then something happened.

    In February 2011 Nokia’s CEO announced a new strategy, comparing Nokia’s existing offerings to a burning platform, and announcing – among other things – that Nokia’s existing operating systems are obsolete, and Nokia will focus on an operating system developed by Elop’s previous employer, Microsoft.

    The reaction of the market participants was devastating. Nokia’s share price lost about 25% immediately after the announcement, and a total of more than 50% within 6 months after the announcement. Nokia’s market cap crashed from about $44 Billion to about $19 Billion, a loss of $25 Billion within 6 months.

    So, what is the problem here?

    Is the new strategy flawed? Apparently the market thinks so. (And I do too, but this is beside the point).

    But for certain the execution of the new strategy is deeply flawed.

    I will examine the execution flaws in a following post, but before that please read about my other 2 contenders for miserable execution of strategic change, Netflix and HP.


    Claus Schafhalter, Sunogos Inc.


    Find the other installments of this series:

    Strategic Change, Execution Blunder:


    (1) Part 1 – Introduction
    (2) Part 2 – What Happened At Nokia

    (3) Part 3 – Netflix’ Troubles

    (4) Part 4 – Netflix Commits A U-Turn

    (5) Part 5 – Does HP Know What It Wants To Be?


    Topics: Change Management, Strategic Change, Strategic Execution | Comments Off on Strategic Change, Execution Blunder (Part 2) – What Happened At Nokia

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